Philadelphia, H. & P. R. Co. v. Lederer

• Decision Date: 18 January 1917
• Docket Number: 3256-3280.
• Citation: 239 F. 184
• Parties: PHILADELPHIA, H. & P.R. CO. et al. v. LEDERER, Collector of Internal Revenue.
• Court: U.S. District Court — Eastern District of Pennsylvania

239 F. 184

PHILADELPHIA, H. & P.R. CO. et al. v. LEDERER, Collector of Internal Revenue.

Nos. 3256-3280.

United States District Court, E.D. Pennsylvania.

January 18, 1917

Wm Clarke Mason, of Philadelphia, Pa., for plaintiffs.

Edward S. Kremp, Asst. U.S. Atty., and Francis Fisher Kane, U.S Atty., both of Philadelphia, Pa., for defendant.

THOMPSON District Judge.

The several railroad companies, plaintiffs, brought suit to the use of the Philadelphia & Reading Railway Company, as lessee of their railroad properties, against Ephraim Lederer, as United States collector of internal revenue, for taxes for the fiscal years 1909, 1910, 1911, and 1912, paid under protest as special excise taxes with respect to the carrying on or doing of business by them as corporations organized for profit and having capital stock represented by shares, under the provisions of section 38 of the act of Congress approved August 5, 1909 (Act Aug. 5, 1909, c. 6, 36 Stat. 112 (Comp St. 1913, Secs. 6300-6307)). By agreement of counsel, the cases were tried together before the same jury.

It was alleged in the statements of claim, and proved at the trial that the several plaintiff corporations were not actively engaged in the operation of their railroads, but that the Philadelphia & Reading Railway Company was, during the period in question, operating them under lease, and that the income for which return was made and the taxes in question collected was received by the several plaintiffs as rental for their roads and distributed by them as dividends to their stockholders. The facts in relation to the carrying on of business by the plaintiffs, as shown by the various leases under which the railroads were operated, clearly brought all of the plaintiffs within the law as laid down in the Minehill Case, 226 U.S. 295, 33 Sup.Ct. 419, 57 L.Ed. 842.

As to the Philadelphia, Harrisburg & Pittsburgh Railroad Company, it was contended on behalf of the collector that the Philadelphia & Reading Railway Company was not operating the road as lessee, because it claimed as assignee under a lease which was not upon its face assignable. As the testimony conclusively showed that the rental had been paid to the plaintiff as lessor, and that the road had been, since the assignment, operated by the Philadelphia & Reading Railway Company, under the terms of the lease, no sufficient ground is presented for a collateral attack upon the lease.

The principal contention in the case, however, was based upon the fact that the taxes for 1909, 1910, and 1911 were not paid to or collected by the defendant, but were paid to and collected by his predecessor in office, William McCoach. It was therefore contended on the part of the defendant that, even if all the taxes were unlawfully collected under the decision in the Minehill Case, a verdict and judgment could not go against him for the taxes paid to Collector McCoach. Upon the conclusion of the evidence, the court, after some preliminary comment, directed a special verdict in each case in the following language:

'You are therefore instructed to find a verdict in favor of the plaintiff for taxes paid to Mr. McCoach for 1909, 1910, and 1911, the sum of * * *, and for the amount paid to Mr. Lederer for the year 1912, the sum of * * * the amounts in each case being inclusive of interest from the date of payment. This verdict is found subject to a point of law reserved by the court as to whether under the evidence the plaintiff is entitled to recover anything for the taxes paid to Mr. McCoach.'

The jury returned a special verdict in each case accordingly.

The cause of action in these cases is assumpsit upon an implied contract to return money unlawfully received. The nature of the action is clearly determined in the case of Patton v. Brady, Ex'x, 184 U.S. 608, 22 Sup.Ct. 493, 46 L.Ed. 713, where Mr. Justice Brewer reviews the prior cases, and it is held that, where a collector dies pending the suit, the suit survives against his personal representative. That upon a judgment in such an action the collector is personally liable and execution can, except for statutory provisions, be had against his property, there appears to be no doubt.

In suits brought against collectors of the revenue for acts done by them or for the recovery of money exacted by or paid to them and by them paid into the treasury, Congress by the Act of Sept. 24, 1789, c. 20, 1 St. 92, re-enacted by the Act of March 3, 1863, c. 76, Sec. 13, 12 St. 741, made it the duty of district attorneys to appear in behalf of the defendants in such suits unless otherwise instructed by the Secretary of the Treasury. Rev. Stat. Sec. 771 (Comp. St. 1913, Sec. 1296). And, in order to protect collectors from personal liability for official acts in proper cases, by section 12 of the Act of March 3, 1863, Rev. St. Sec. 989 (Comp. St. 1913, Sec. 1635), Congress provided:

'When a recovery is had in any suit or proceeding against a collector or other officer of the revenue for any act done by him, or for the recovery of any money exacted by or paid to him and by him paid into the treasury, in the performance of his official duty, and the court certifies that there was

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